Correlation Between Home Depot and Lightinthebox Holding

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Can any of the company-specific risk be diversified away by investing in both Home Depot and Lightinthebox Holding at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Home Depot and Lightinthebox Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Lightinthebox Holding Co, you can compare the effects of market volatilities on Home Depot and Lightinthebox Holding and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Home Depot with a short position of Lightinthebox Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Lightinthebox Holding.

Diversification Opportunities for Home Depot and Lightinthebox Holding

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Home Depot and Lightinthebox is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Lightinthebox Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lightinthebox Holding and Home Depot is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Home Depot are associated (or correlated) with Lightinthebox Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lightinthebox Holding has no effect on the direction of Home Depot i.e., Home Depot and Lightinthebox Holding go up and down completely randomly.

Pair Corralation between Home Depot and Lightinthebox Holding

Allowing for the 90-day total investment horizon Home Depot is expected to under-perform the Lightinthebox Holding. But the stock apears to be less risky and, when comparing its historical volatility, Home Depot is 2.29 times less risky than Lightinthebox Holding. The stock trades about -0.06 of its potential returns per unit of risk. The Lightinthebox Holding Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Lightinthebox Holding Co on July 2, 2022 and sell it today you would earn a total of  12.00  from holding Lightinthebox Holding Co or generate 12.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Home Depot  vs.  Lightinthebox Holding Co

 Performance (%) 
       Timeline  
Home Depot 
Home Depot Performance
0 of 100
Over the last 90 days Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Home Depot is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Home Depot Price Channel

Lightinthebox Holding 
Lightinthebox Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Lightinthebox Holding Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Lightinthebox Holding may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Lightinthebox Price Channel

Home Depot and Lightinthebox Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Depot and Lightinthebox Holding

The main advantage of trading using opposite Home Depot and Lightinthebox Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, Lightinthebox Holding can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lightinthebox Holding will offset losses from the drop in Lightinthebox Holding's long position.
Home Depot vs. Amazon Inc
The idea behind Home Depot and Lightinthebox Holding Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Lightinthebox Holding vs. Amazon Inc
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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